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Suzano 2Q Earnings Up on Increased Sales

July 23, 2008 (Press Release) - Suzano Pulp and Paper, one of Latin America's largest integrated producers of pulp and paper, announced consolidated results for the 2nd quarter of 2008 (2Q08). The Company's operational and financial data is shown on the basis of consolidated figures in Reais, pursuant to the Brazilian Corporate Law accounting method. Comparisons, unless otherwise stated, refer to variations between the 2Q08 against 1Q08 and 2Q07.

Highlights

  • Eucalyptus pulp price increased to US$ 840 / t (CIF Europe) in April; in June, new increase of US$ 30 / t in Asia;
  • Hardwood inventories reached 34 days of supply in May, compared to 35 days in March 2008;
  • EBITDA record of R$ 354 million; EBITDA margin 35.2%;
  • Net income of R$ 186 million, 44% higher than 1Q08 despite the non-recurring financial expense of R$ 111 million for the repurchase of controlling stock from Ripasa's former shareholders; Net revenue of R$ 1 billion posts new record;
  • Pulp sale volume of 352 thousand tons;
  • Net Debt / EBITDA ratio drops to 3.19 in June;
  • Cash cost of pulp reduced to R$ 424 / ton;
  • Real appreciates 9.9% in the quarter;
  • Production record of 681 thousand tons of pulp and paper;
  • Announced today the new growth cycle for 2008 / 2015 (read Material Fact released today).

Net revenue recorded in 2Q08 was R$ 1.0 billion, or 3.5 % higher than 1Q08, and 22.3% higher than 2Q07. That amount can be explained by the increase in the pulp and paper sale volumes, mainly due to the production of the new Mucuri line (Line 2).

The average pulp price reached R$ 1,181 / ton, 0.9% higher than the 1Q08, positively contributing to the revenue. On the other hand, the appreciation of the Real and the large share of the paper volume in the export market compensated, in part, said positive effect.

The average price of paper was R$ 2,076 / ton in the 2Q08, at the same level of the 1Q08 and 4.7% lower than that of the 2Q07.

Pulp price and volume increases raised that product's share in the Company's net revenue to 41% in the 2Q08, compared to 25% in the 2Q07.

In 2Q08, 352.3 thousand tons of pulp were sold, a volume 1.3% higher than that of 1Q08 and 100.4% higher than that recorded in the same period of 2007. The growth compared to the 1Q08 took place due to the development of the learning curve of the Line 2 at Mucuri. In the first semester, 700 thousand tons of pulp were sold, an amount twice as large as that of the first semester of 2007.

Similarly to 1Q08, the growing demand for eucalyptus pulp allowed for absorbing the full additional capacity arising from the start of operations of Line 2 at Mucuri, maintaining our inventories below normal levels.

Printing and writing paper sales were equivalent to 77% of this quarter's sales volume, and reached 218 thousand tons, a 3.2% increase when compared to the 1Q08, and in line with 2Q07. Sales of that product to the domestic market were equivalent to 54%, or 118 thousand tons.

As to cartonboard sales, these were 9% higher than those of the previous quarter, reaching 65 thousand tons. Compared to 2Q07, there was a 4.8% drop. 64.2% of the volume was sold in the domestic market.

Production recorded in the 2Q08 reached a volume of 680.7 thousand tons, of which 400.3 thousand tons were market pulp and 280.4 thousand tons were paper.

Cash cost of the pulp production in Mucuri in the 2Q08, without the cost of the standing timber, reached R$ 424 / ton. That amount is 13.1% lower than the recorded in the 1Q08 and 4.9% lower than the same period in the previous year, and already shows a portion of the gains arising from the dilution of fixed costs and lower specific consumptions at the Mucuri plant with the start of operations of Line 2.

In the 2Q08 the cash generation measured by the Adjusted Ebitda reached R$ 353.8 million, equivalent to a 3.7% increase when compared to the 1Q08 and 26.7% compared to the same period in the previous year. In the first six months of 2008, the Adjusted Ebitda was R$ 694.9 million, 25.4% higher than that of the first semester of 2007. The 35.2% Ebitda margin remained stable when compared to the previous quarter and increased 1.2 p.p. compared to the 2Q07.

The Adjusted Ebitda in dollars for this quarter was US$ 213.7 million, 8.9% and 51.6% higher than the 1Q08 and 2Q07, respectively. In this semester, the Adjusted Ebitda in dollars was US$ 410.1 million.

Net income for the period was R$ 185.6 million, 44.3% higher when compared to the 1Q08 and 7.8% higher if compared to the 2Q07. In the first six months of 2008, accumulated net income amounted to R$ 314.2 million, 12.9% higher than that of the first six months of 2007.

On June 30 2008, the consolidated net debt was R$ 4,106 million, representing 3.19 times its cash generation (past twelve months adjusted Ebitda) for the period compared to a debt of R$ 4,225 million and a ratio of 3.48 in the 1Q08.

The growth of cash generation (last twelve-month Ebitda) for the period, which reached R$ 1,287 million, contributed to the reduction of the nominal indebtedness.

In compliance with Paragraph 4 of article 157 of Law No. 6.404/76 and provisions of the Brazilian Securities and Exchange Commission ("CVM") Edict No. 358/02, Suzano Papel e Celulose S.A. hereby informs its shareholders and the market in general, about projects which are part of Suzano's new growth cycle for the period 2008 through 2015.

With the future implementation of these projects, the company's annual pulp production capacity will increase by 4.3 million tons and its overall pulp and paper production capacity will total 7.2 million tons per year.

Pulp Capacity Expansion

The projects announced herein include three planned pulp lines and the expansion of the Mucuri Unit:

  • Pulp unit in the south of Maranhao state (1 line).
  • Pulp unit in the of Piaui state (1 line).
  • Expansion of the Mucuri Unit production capacity by de-bottlenecking existing Lines 1 and 2.
  • Additionally, a new pulp line is also planned to be installed in one of the above-mentioned units located in Maranhao, Piaui or another new unit to be defined.

The forecasted installed capacity of each new pulp line, based on technology of current projects, is approximately 1.3 million tons per year. The effective capacity will be determined when the respective engineering projects are prepared based on technology then available.

SOURCE: Suzano Pulp and Paper




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